First Security Bank of Pocatello v. Zaring Farm & Livestock Co.

• Decision Date: 01 April 1932
• Docket Number: 5765
• Citation: 10 P.2d 303,51 Idaho 700
• Court: Idaho Supreme Court
• Parties: FIRST SECURITY BANK OF POCATELLO, a Corporation, Respondent, v. ZARING FARM & LIVESTOCK COMPANY, a Corporation, et al., Respondents, and WESTCOTT-ALLEN OIL COMPANY, a Corporation, Appellant

10 P.2d 303

51 Idaho 700

FIRST SECURITY BANK OF POCATELLO, a Corporation, Respondent, v. ZARING FARM & LIVESTOCK COMPANY, a Corporation, et al., Respondents, and WESTCOTT-ALLEN OIL COMPANY, a Corporation, Appellant

No. 5765

Supreme Court of Idaho

April 1, 1932

CHATTEL MORTGAGES - TRANSFER OF PROPERTY - WAIVER OF LIEN - GARNISHMENT-RIGHTS OF JUDGMENT CREDITOR.

1. Finding that chattel mortgagee had not waived mortgage held sufficient, where issue was mortgagee's consent to sale of mortgaged property, though more of conclusion than finding.

2. Findings should be liberally construed.

3. Judgment creditor of mortgagor at time of garnishment had no greater right to proceeds from sale of mortgaged property than mortgagor.

4. Chattel mortgagee permitting warehouse to sell mortgagor's wheat on condition mortgagee receive proceeds remaining after payment to pledgee of warehouse receipts did not waive mortgage lien on proceeds as to mortgagor's judgment creditor.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action for interpleader. Judgment for Evans Mercantile Company. Judgment affirmed.

Judgment affirmed, with costs.

R. W Jones and Merrill & Merrill, for Appellant Westcott-Allen Oil Company.

Where mortgaged personal property is sold by the mortgagor with the consent of the mortgagee, the lien of the mortgage is waived and the mortgagor cannot follow either the property previously mortgaged or the proceeds. (Peoples v Whitworth, 41 Idaho 225, 238 P. 306; Adamson v Moyes, 32 Idaho 469, 184 P. 849; Bellevue State Bank v. Hailey National Bank, 37 Idaho 121, 215 P. 126; Utah-Idaho Livestock Loan Co. v. Blackfoot City Bank, 290 F. 588; Maier v. Freeman, 112 Cal. 8, 53 Am. St. 151, 44 P. 357.)

F. M. Bistline and W. C. Loofbourrow, for Respondent Evans Mercantile Company.

A mortgagee does not lose the lien of his mortgage where his consent to sell is conditional. (Bellevue State Bank v. Hailey National Bank, 37 Idaho 121, 215 P. 126; Rock Springs National Bank v. Luman, 6 Wyo. 123, 42 P. 874.)

Jones, Pomeroy & Jones, for Respondent First Security Bank of Pocatello.

GIVENS, J. Lee, C. J., and Budge, Varian and Leeper, JJ., concur.

OPINION

GIVENS, J.

Respondent interplead the other parties herein to determine who was entitled to $ 764.67 held by it as the proceeds from the sale of certain wheat. The real controversy is between the Evans Mercantile Company, who claims as chattel mortgagee, and the Westcott-Allen Oil Company, who claims as execution creditor of the Zaring Farm & Livestock Company.

April 4, 1930, the Zaring Farm & Livestock Company gave a first chattel mortgage for $ 1,200 to the Citizens Bank & Trust Company, and a second mortgage for a larger amount to the Evans Mercantile Company, covering certain growing crops, part of which later harvested, was the wheat sold herein. Thereafter, during the summer of 1930, the Farm Company needed more money to carry on operations, and warehouse receipts covering some 600,000 pounds of the wheat covered by the above mortgages then in the Michaud Warehouse Company, were pledged to the respondent, First Security Bank of Pocatello, and the Citizens Bank & Trust Company, for loans made by them to the Farm Company.

Later, this wheat was sold with the consent of all parties, with the understanding between the Farm Company, the Mercantile Company and the Warehouse Company which sold the wheat, that after the two banks were paid, the balance was to be paid to the Mercantile Company. After the warehouse receipts had been pledged to the banks, and before the sale of the grain, the Westcott-Allen Oil Company brought suit against the Farm Company, and served garnishment proceedings upon the First Security Bank, later reducing its claim to judgment and likewise levying execution. When the wheat was sold the Warehouse Company received the proceeds from the purchaser, deducted its charges, and made out two checks drawn on the First Security Bank: one to the Citizens Bank & Trust Company for its loan and the other to the First Security Bank for the balance, which covered the amount due the First Security Bank, and the $ 764.67 in dispute herein. The Citizens Bank & Trust Company, being paid in full, is now entirely out of the controversy. The First Security Bank cashed the check payable to it without an indorsement of the Evans Mercantile Company, paid itself, and held the balance because of the garnishment proceedings.

The court adjudged respondent, Evans Mercantile Company, entitled to the amount in dispute, and the Oil Company appeals. The First Security Bank deposited the $ 764.67 in court, and was dismissed from the suit with its costs.

The numerous errors assigned are summed up in the two main contentions of appellant: first, that the findings were insufficient, and, second, as a matter of substantive law and fact, that respondent consented to the sale and thereby waived its mortgage, and that no lien continued over as to the proceeds of the sale of the wheat.

J. Paul Evans, of the Evans Mercantile Company, testified in substance that when he consented to the sale, it was understood between him and a representative of the mortgagor, and the warehouse concern which sold the wheat, that the proceeds were to be used, first, to pay the banks, and the balance applied on the Mercantile Company's mortgage. The representative of the Farm Company testified in substance to the same thing, as did also Mrs. Irvine, one of the employees of the Warehouse Company, and the checks drawn by the Warehouse Company after it had received the proceeds from the purchaser of the grain were drawn either in accordance with or in such manner as to carry out this understanding: first, one in favor of the Citizens Bank & Trust Company for the full amount of its note, and the other drawn in favor of the First Security Bank and Evans Mercantile Company, for the full amount of the note held by the First Security Bank, the balance being the $ 764.67 in dispute herein.

While the testimony of the respective officers of the two banks may be taken to indicate that they did not know of any condition attached to the sale, their testimony does not controvert that such condition was understood and agreed upon between the Mercantile Company, mortgagee, the Farm Company, mortgagor and debtor, and the Warehouse Company which sold the wheat; merely that they did not know of it. The banks knew of the mortgage held by the Mercantile Company, and that it had certain rights in the grain, because they insisted that the warehouse receipts be indorsed by the Mercantile Company before they would advance the loans upon the security of the warehouse receipts. The banks have been paid, claim no rights adverse to either party, and no rights are claimed by either of the real contestants herein, by or through the banks; hence, the banks and any questions concerning them are entirely out of the controversy.

Even though the finding that the Mercantile Company had not waived its mortgage is, in view of the evidence and the vital point involved, viz., conditional or unconditional consent by the mortgagee to the sale, more of a conclusion than a finding, it, in effect, is sufficient to cover the point. (Nohrnberg v. Boley, (opinion on rehearing) 42 Idaho 48, at 71, 246 P. 12.) The issue of consent is, and was, recognized and considered as an issue in the case, and argued by both parties, and neither misunderstands the point involved, and no prejudice is shown by the finding not being more specific. Findings should be liberally construed (Cleveland v. Mochel, 48 Idaho 37, 279 P. 410), and the evidence does not demand with such compulsion a contrary finding, i. e., of unconditional consent, as to require a reversal on this point. (Storey & Fawcett v. Nampa & Meridian Irr. Dist., 32 Idaho 713, 187 P. 946.)

The Oil Company can claim no greater right to the money in dispute than the Farm Company possesses, or possessed at the time of the garnishment or execution. (Feltham v. Blunck, 34 Idaho 1, at 9, 198 P. 763; Hudelson v. Sanders-Swafford Co., 111 Ore. 600, 227 P. 310; First Nat. Bank v. Riggle, 195 Iowa 189, 190 N.W. 143, 147; Scurry v. Quaker Oats Co., 201 Iowa 1171, 208 N.W. 860; Borgen v. Auguski, 51 S.D. 65, 212 N.W. 47.)

Starting, then, with the factual premise that the Mercantile Company, mortgagee, gave only conditional consent to the sale conducted by a third party not the mortgagor, and that the proceeds never came into the latter's possession, appellant's authorities do not touch the point; thus: Peoples v. Whitworth, 41 Idaho 225, 238 P. 306, Adamson v. Moyes, 32 Idaho 469, 184 P. 849, Ramsey v. California Packing Corp., 51 Cal.App. 517, 201 P. 481, Greer v. Newland, 70 Kan. 315, 109 Am. St. 424, 78 P. 835, 70 L. R. A. 554, Frick Co. v. Western Star Milling Co., 51 Kan. 370, 32 P. 1103, Reese v. Kapp, 82 Kan. 304, 108 P. 96, Burnett v. Gustafson, 54 Iowa 86, 37 Am. Rep. 190, 6 N.W. 132, Coughtan v. Western Elevator Co., 22 S.D. 214, 116 N.W. 1122, Stinson v. Sneed, (Tex. Civ. App.) 163 S.W. 989, Irish v. Citizens' Trust Co., 163 F. 880, did not consider the effect of a conditional consent, or consent coupled with specific directions as to the disposition of the proceeds from the sale of mortgaged property, or where the sale was made by a party other than the mortgagor, or where the mortgagor was considered as acting as agent for the mortgagee.

Bellevue State Bank v. Hailey National Bank, 37 Idaho 121, 215 P. 126, recognizes the efficacy of a conditional consent at page 126, as follows:

"We conclude that, if Brown Bros. agreed with respondent, in consideration of its consenting to the sale, to apply the proceeds on its mortgage, and if appe...